MGA_1

Inflation or Deflation: Which Will Win?

Well first off, inflation is an expansion in money and credit. Deflation is a contraction in money and credit. During heavy inflationary times people can lose faith in the currency, raid their bank accounts and greatly increase the money in circulation thereby increasing consumer prices.

There are only two ways of clearing out excess debt/credit - deflation or inflation. We were on a deflationary path until the govt/fed stepped in. I pick significant inflation until the govt gives up and we have heavy deflation.

Morgan Stanley Sees V-Shaped Recovery: I See W-Shaped Recession

Oh... just wait until Fall & Winter... especially winter. The US is broke and needs to learn how to save and manufacture again.

Speaking of Gold...

We WERE on a deflationary downtrend the later part of '08... then the fed stepped in with TARP, asset purchases, long bond purchases, etc. I don't think the govt has the stomach for a deflationary crash so I think they're gonna print and continue to print...

This Recession Isn't Over: Now for the Hard Part

Sorry, but I think we're actually about 1/3 or 1/4 the way through this thing. The problem is still *debt*. Tons of it. Credit card, Alt-A/Option Arms and then commercial real estate. Then our govt.

I don't think comparing us with 90's Japan is a good comparison - I would actually say we are more like 2000 Argentina. A lot of external debt (china/japan). Huge public sector programs and budget deficits and I think the govt is going to try and save the day through monetary policy. I'm looking for a continued inflationary downturn.

Why Are Interest Rates Rising on Treasuries?

If the govt starts directly purchasing treasury bills, then we off to the races. If they start purchasing t bills to pay for the interest on the debt then it's game over.

We should be deflation, BUT why do I see prices rising in restaurants & grocery stores - at least in Southern California?

Mr. Bernanke has said he will do anything he can to avoid deflation which he has done so far. If he stops intervening, then yes, deflation will resume, but he seems to have little motive to let that occur....

Current Recession Is Tracking the 1930s Bear Market

I actually think the we are worse off now than we were during the beginning phases of the Great Depression simply because there is much more outstanding debt than what existing during the great depression. The fed's tried everything and had no effect.

The one thing I would not be doing right now is heading *into* equities. We had a pretty good bear market rally since March (they had bear market rallies in the Great Depression), but the long term prognosis for the economy is very poor and the stock market should follow in suite.

The one difference between now and GD1 was monetary and budgetary discipline which has been completely thrown out of the window, so I'm expecting inflation.

Where's the Bottom?

The long term prospects for the US economy are dismal - we've got successive waves of residential & commercial real estate defaults coming down the pike + credit card defaults. I think it's going to be pretty ugly and at least as bad as the subprime fallout (and probably quite a bit worse). I can't imagine US equities not continuing a long term downward trend... with one caveot - the govt is injecting a heck of a lot of money into the economy so I expect to see inflation at some point in time.... still - I expect the DOW to continue downwards for awhile.

GDP and Debt: On the Cusp of Rampant Inflation?

There's been tremendous inflation of the money supply. Bernanke has talked about taking the money out when necessary, but how? Won't that process crash an already troubled economy?

The thing I'm really watching for is how the upcoming deficits will be funded. If the fed begins to directly monetize the debt (which I'm betting they will) then I'll bet we'll see inflation that far exceeds anybody's expectations.

Market, Economy Downward Spiral Has Been Broken

This is a pretty darn good rally, but even after the initial crash of 1929 the market had a 50% rally.

I wish we were out of the woods, but that's simply not the case. We are currently in between stages of real estate defaults that going to bring out the bear again. The defaults rate looks to be picking up again probably around mid summer.

There will be lots of bear market rallies, but I wouldn't look for the true bull market to start until most of the bad debt has been cleared out of the US economy.

Gary Shilling Continues to See Deflation on the Horizon

It seems to me we are in a period of asset deflation and commodity inflation (foodstuffs & energy). I don't know about you all, but grocery prices and restaurant prices in Southern California have not gone down. Bankruptcies are deflation pure and simple, but the fed is printing a lot of money and also planning to directly monetize govt debt - I'm wondering if this monetization will show up in commodity prices?

Markets Moving from Depression to Recession

Depression into recession back into depression. The govt has pumped a tremendous amount of money into the economy and we are between waves of bank failures. Additionally, the banks have been able to change their accounting rules to mark to model instead of mark to market so things look a little better for the short term. I look at this as a string bear market rally that may even last into july.

There are two more waves of real estate default waves coming down the pike - commercial & alt-a/option arm residential. These default waves look to dwarf subprime so this bull will eventually turn into a bear. I wish there were good macro news, but unfortunately, the downward trend will resume later this year.

The End (of the Recession) Is Near

We are between real estate busts periods right now. Just got done with subprime, next up is commercial real estate & alt-a/option arm. If it was *just* subprime we could probably peek our heads, but such is not the case. The downtrend has a ways to go....

Does the IMF Warning Indicate a Repeat of 1930s Banking Crises?

Basically, there is a lot of bad debt out there that still needs to be flushed out of the system - hence the banking crisis will continue. It looks to me like the banking system became *way* overextended and is now suffering the inevitable contraction.

So, how much longer to go? Well, we've just seen the bulk of the sub-prime stuff work it way through the system which has basically bankrupt most of the major US banks and sent the DOW down to a low of 6500. Next up commercial real estate then & then Alt-A/Option Arm with a total losses expected to be much greater than the subprime meltdown. Looking at this data, I can't imagine that we won't see a downturn very similar to the 1930's or worse.

Alt-A/Option Arm resets end around 2012, so, I don't see this thing ending anytime before then. I think the US (and world) banking system is going to be cut to a fraction of what it currently is.

Stocks Are Due for Consolidation, But the Worst Is Behind Us

It's not over - we're in a lull right now between stages of real estate defaults. Next up is commercial real estate then alt-a/option arm. Defaults should start picking back up around summer, autumn of this year. There is also a tremendous amount of housing in default that the banks are not putting on the mls for fear of having to write down the loans (and put themselves into default).

I hate to say it, but we have a long ways to go with this one.

New Bubbles Are Brewing in Shanghai and on Wall Street

Tiny bubbles......